While Stock Returns Are Commonly Modeled as Lognormal, Bond Returns

question 8

Multiple Choice

While stock returns are commonly modeled as lognormal, bond returns are less ideally modeled as lognormal because

• A) Bond return volatility may not always be increasing in maturity.
• B) Bond yields may be negative when bond returns are lognormal.
• C) Both (a) and (b).
• D) Neither (a) nor (b).

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